Bearish Signals from the Bollinger Bands for 5 Renewable Energy Equipment Stocks
The renewable energy industry has performed incredibly well over the last 10 months. After bottoming at $21.11 in March, the Invesco Solar ETF (TAN) has rallied over 400%. As you can imagine, such a rally has caused the ETF and most of the stocks in the group to reach overbought levels on their weekly charts. In most cases they are also overbought on the daily and monthly charts as well.
I ran a scan on December 24 for stocks in overbought territory that also had their daily stochastic indicators make bearish crossovers. On that list were five different renewable energy equipment stocks and the Invesco Solar ETF. The five stocks were:
First Solar (FSLR)
JinkoSolar (JKS)
Sunnova Energy International (NOVA)
Plug Power (PLUG)
Sunpower (SPWR)
When I pulled up these five stocks on the Tickeron Technical Analysis Screener, I couldn’t help but notice all five stocks had received bearish signals from the Bollinger Bands indicator within the last three days. Two of the five, Sunnova and JinkoSolar, had bearish signals generated on December 28.
The Tickeron Scorecard has Plug Power ranked as a “sell” and First Solar is ranked as a “strong buy”. The other three have “buy” ratings. Despite the scorecard grades, there are some areas of concern on the fundamental side. All five stocks have poor SMR ratings and four of the five have poor P/E Growth Ratings. We also see that three of the five are overvalued at this time.
I looked at the analysts’ ratings and the short interest ratios for these five stocks in order to get a sense of the sentiment toward them. There is quite a bit of pessimism toward First Solar and Sunpower while the sentiment is neutral on JinkoSolar.
Sunnova Energy and Plug Power both have quite a bit of optimism directed at them right now. Both companies have 11 analysts following them with 10 of the 11 rating the stock as a “buy”. In both instances there is one “hold” rating on each stock. The short interest ratio for Sunnova is very low at 1.6 and Plug’s is below average at 2.49.
What all of this tells me is that if the bearish crossovers from the stochastic indicators and the bearish signals from the Bollinger Bands turn out to be accurate, it will be driven primarily from technical factors. The overbought levels could cause some investors to take profits.
To give you an idea of how the stocks compare to one another and to other stocks in general, I used the comparison feature on Tickeron to compare Plug, Sunnova, and First Solar. If you recall Plug was rated as a “sell”, Sunnova was rated as a “buy”, and First Solar is rated as a “strong buy”.
Momentum Indicator for TAN turns negative, indicating new downward trend
TAN saw its Momentum Indicator move below the 0 level on April 11, 2024. This is an indication that the stock could be shifting in to a new downward move. Traders may want to consider selling the stock or exploring put options. Tickeron's A.I.dvisor looked at 80 similar instances where the indicator turned negative. In of the 80 cases, the stock moved further down in the following days. The odds of a decline are at .
Technical Analysis (Indicators)
Bearish Trend Analysis
The Moving Average Convergence Divergence Histogram (MACD) for TAN turned negative on April 12, 2024. This could be a sign that the stock is set to turn lower in the coming weeks. Traders may want to sell the stock or buy put options. Tickeron's A.I.dvisor looked at 45 similar instances when the indicator turned negative. In of the 45 cases the stock turned lower in the days that followed. This puts the odds of success at .
TAN moved below its 50-day moving average on April 10, 2024 date and that indicates a change from an upward trend to a downward trend.
The 10-day moving average for TAN crossed bearishly below the 50-day moving average on April 12, 2024. This indicates that the trend has shifted lower and could be considered a sell signal. In of 13 past instances when the 10-day crossed below the 50-day, the stock continued to move higher over the following month. The odds of a continued downward trend are .
Following a 3-day decline, the stock is projected to fall further. Considering past instances where TAN declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
The Aroon Indicator for TAN entered a downward trend on April 16, 2024. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options.
Bullish Trend Analysis
The Stochastic Oscillator shows that the ticker has stayed in the oversold zone for 7 days. The price of this ticker is presumed to bounce back soon, since the longer the ticker stays in the oversold zone, the more promptly an upward trend is expected.
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where TAN advanced for three days, in of 302 cases, the price rose further within the following month. The odds of a continued upward trend are .
TAN may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options.
Fundamental Analysis (Ratings)
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Fundamental Analysis Ratings
The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows
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